Virtual Worlds

Title & Rationale
Before I started playing online games, that is, when I have little knowledge on virtual world, I do not think have a good impression on it. I thought it is only an activity which let many people wasted their precious time. After few years of observation through self experience, I found that it is actually also a social interaction activity with other players without geographical and demographical border. Virtual world creates a space for people from various backgrounds to mix together and communicate their mind and take down their mask. In that other world they can be what they want to be.


Virtual economy is studied in this paper, when I realized that in reality this concept is not widely known and understood by public. In general the virtual world concept, mainly MMORPG games brought a negative impression to adults (mostly parents) as many social news associated with those conflicts in game. I want to prove that there is something technical and meaningful to learn from the economy aspect of the game, as long as players do have a mind of learning attitude towards it, and getting the best achievement out of the activity. In this paper, I am going to discuss about the economy aspects by analyzing a Chinese background MMORPG based online game, MoSiang Online (MY).

The virtual economy and real economy are closely related as well. Many professions come into sight in real world brought to by virtual world economy, such as professional player help playing other people’s id and earn an income from the owner, or selling character after training their id to a certain level, and even exchange the virtual money or goods for real world money. Below this, discussions on the methods of doing so were explained and illustrated. Hopefully readers can gain some concept out of them. =)


Research Objectives
•To provide more specific understanding on how a virtual economy operates from a player's view, based on a selected MMOPRG game.


•To study the factors affecting the economy of a virtual world.

•To give guidelines for a first time player to earn money from a virtual environment.

•To generate public awareness that virtual economy is actually related to real world economy

Outline of Final Paper
1.0 Introduction

2.0 Price and Quantity Demanded

3.0 Demand & Supply
      3.1 Demand of Goods
      3.2 Supply of Goods

4.0 Market
     4.1 Game
     4.2 Discussion Forum

5.0 Creation of Goods & Services
    5.1 Power up Goods
    5.2 Stone makers

6.0 Exchange Rate
     6.1 Gaming Open Market (GOM)
     6.2 Exchange Rate in MoSiang

Literature Review/ Background
Virtual world can be studied from many aspects, the economy is one of the interesting subject found to be similar to real world economy. The emergence of virtual economy as a fast developing industry caused some experts to research on it. When virtual economy exist in a virtual world and the avatars does not rely on the economy to survive, how can the economy runs smoothly and continuously like the real economy does?


MMORPG games are commonly known to be addictive to players. Real economy runs as a group of people in the economy cycle exchange other things with other group of people from what they can produce. However, virtual economy is more similar to the gambling concept in real economy. Gambling implies the important concept of luck as in a part of Chinese culture. In MMORPG many activities are programmed as a rotating system-of-luck. For example, farming activities, where players can sometimes receive rare and precious items. In Mosiang, as illustrated in Power Up and Combination system (4.0 Creation of Goods & Services), it has certain probability associated apart from relying solely on player’s skill level. The probability, which is also called luck, can attract everyone to try, as there is always a chance to win. When they lose, they would think that they might win it back in greater amount next time. Human’s greed never can be measured nor satisfied. XD

The future of virtual economy is potentially developable in following years. In my opinion, even in virtual economy, human act rationally, placing their own self-interest in first place. The virtual economy examined can fully support this theory. When there are winners, there will be losers. Everyone competes to get their benefit in the virtual world using their very own strategy. Some obtain social benefit, while others obtain economic benefit or maybe other applicable benefits. Players sacrificed in terms of money and time and effort when they consume goods and services in virtual world. In this challenging environment, players only required to sit in front of a computer and click the “mouse” or type on keyboard to enjoy the benefits or experience losses. A trend of advanced technology is formed and people become lazier. Future statistics will move towards virtual economy development rather than real economy, if no efforts by authority is attempted. As in predicted by Bowers M., future entertainment are trends are growing based on Internet, primary trends of consumer electronic spending is also taken over by digital TV, gaming leads the software sales, and increasing computer power drives changes such as increasing emphasis on productivity etc.


If we relate the system used in MMORPG to the gambling concept, virtual economy can be related to social costs of gambling. Continuous number of players splurge into virtual world to share their market to earn profit will generally cause a negative shift in aggregate social wealth. In economics, theory of production possibilities frontier (PPF curve) explained that, if a country chooses to produce a category of goods, opportunity cost will be forgone. From the situation now, losses of capital and human resources from real world economy activities to virtual economy activities are foreseeable problems to be solved. The opportunity cost is very costly, as human resource is a country’s most valuable capital asset.


List of References for Final Paper
Bowers, M 2008, Future Trends in Technology: Creating a new reality of business, VatorNews, viewed 15th October 2009, http://vator.tv/news/show/2008-10-06-future-trends-in-technology


Eadington, WR 2003, Measuring Costs from Permitted Gaming: Concepts and Categories in Evaluating Gambling’s Consequences, vol. 19 no. 2, Journal of Gambling Studies, SpringerLink, http://www.springerlink.com.ezproxy.lib.swin.edu.au/content/p2276l14lv172221/?p=abb172203ffc4568aafd51d19e9f7172&pi=0

Eladhari, MP 2007, Digra notes day 2: Gambling is in My Genes by Byungho Park, Models for Life in Virtual Game Worlds, viewed 14th October 2009, http://eladhari.blogspot.com/2007/10/digra-notes-day-2-gambling-is-in-my.html

Silverstein, J 2006, Are Some Video Games Gambling? , abcNEWS, viewed 15th October 2009, http://abcnews.go.com/Technology/Story?id=2410456&page=1

Reference:
Bowers, M 2008, Future Trends in Technology: Creating a new reality of business, VatorNews, viewed 15th October 2009, http://vator.tv/news/show/2008-10-06-future-trends-in-technology


Eladhari, MP 2007, Digra notes day 2: Gambling is in My Genes by Byungho Park, Models for Life in Virtual Game Worlds, viewed 14th October 2009, http://eladhari.blogspot.com/2007/10/digra-notes-day-2-gambling-is-in-my.html

Eadington, WR 2003, Measuring Costs from Permitted Gaming: Concepts and Categories in Evaluating Gambling’s Consequences, vol. 19 no. 2, Journal of Gambling Studies, SpringerLink, http://www.springerlink.com.ezproxy.lib.swin.edu.au/content/p2276l14lv172221/?p=abb172203ffc4568aafd51d19e9f7172&pi=0

Some questions for your thinking:
In the trading market, many legal issues can be raised. Tradings are based on trust basically. Have you wondered if the methods available work out well?

Sellers and buyers only meet in the virtual world and they probably will never meet in real world. Some sellers with low moral values make full use of this advantage and cheat money from other players. Hacking cases are always seen in game too. And these problems are difficult to solve, but it reflects our real society. If there is no laws in real world, these crimes will actually happen.

Besides those cyber crimes happened in the virtual worlds, real world cases are happening outside due to game's conflict too. According to the BBC, a Chinese online gamer (A) stabbed another gamer (B) to death when A found out that B sold his virtual sword, "Dragon Sabre", to a third party for 7200 yuan. (Source from BBC) Scary, isn't it?

We people sometimes display different characteristics in front of people while deep inside our heart, we wanted to do something very different from what we are doing everyday. People are addicted to MMOPRG games because they lack of something in real life. They find confidence in games as another person. In MoSiang, there are many old men who are working boringly to pass a day. In games they can be superheroes with strong equipments who looks attractive with the nice armors. Some are students lack of excitement in life transforming into crazy killers in game. Other than that, there are people who find romance in games when they never expect to find one in real life.

Are you addicted to online games?  (Yes I am.. XD)

Are you one of these people? (No I m not.. hehe)

These questions are worth thinking. Actually we can improve our life in many ways. The process of overcoming the obstacles and solving problems are the main part of our life. Get a life then.

Good luck and jia you everyone!!! This is really a tough sem~ @@

Reference:
http://news.bbc.co.uk/2/hi/technology/4397159.stm

Outline of the Research:

1.0 Objectives:

• To provide more specific understanding on how a virtual economy operates from a player's view, based on a selected MMOPRG game. 
• To study the factors affecting the economy of a virtual world.
  
• To give guidelines for a first time player to earn money from a virtual environment.
• To generate public awareness that virtual economy is actually related to real world economy

2.0 Reasons for Choosing Virtual Economy

3.0 Price and Quantity Demanded

4.0 Demand & Supply

5.0 Market

6.0 Creation of Goods & Services

7.0 Exchange Rate

8.0 Background Research/ Literature Review

9.0 Conclusion

P/s: My postings are illustrated heavily by graphics. U can click on the pictures to enlarge the view. Thanks for visiting and enjoy your stay here. ^^

5.0 Exchange Rate
Massively Multiplayer Online Role-Playing Game (MMORPG) forms a huge portion of virtual economy. The understanding of an MMOPRG’s economy operation is helping players to generate real world money. Having various discussions about the operations relating the economy of MoSiang above, I believe everyone has a basic understanding on the methods player control the economy in a virtual world, to be more exact, in MoSiang Online. Exchange rate is the bridge to connect the real world economy with the virtual economy. Players who earned more than what they spent in the game will earn real money outside the world.

5.1 Gaming Open Market (GOM)

Buyers and sellers of the virtual currency used to trade across eBay and forums for years. Now that trade over Gaming Open Market (GOM) in dollar-to-game-currency. Players can easily survey the market price and identify who is selling how much for what price. GOM gives both buyers and sellers an added benefit of holding currency securely. They have more protection as the virtual currencies for sale must be deposited with GOM and accounts are settled through PayPal payments.

Up to 2005, the subscribers of some popular MMORPG games are something like this:

5.2 Exchange Rate in MoSiang

Few types of players can be identified, which are:

A, Players who spend time farming gold all the time and accumulate wealth. They follow the requirements step by step and change equipments when required. Mostly they do not spend real cash in the game. They form a stable target market for equipment sellers, besides provide a source of game money.

B, Players who buy and resell the cash item at higher price in game. They aim for the higher income level players. Normally these people are the medium who change the real world money into game money as they require a lot of money to retain their status in game.

C, Players who create high level and quality virtual items (armors or weapons) for the market. They really surveyed the game and have certain level understanding of the game. They make full use of the combining and PU skills and the cash items available to make the valued goods. They probably earn their real money through supplying the virtual currencies to players, from the powerful virtual items they made. They can be the example of monopoly industry in the game.

At the launch of the game, the currency is valuable as MS gold is hard to farm. When players increased and the conditions keep changed, the game market experienced inflation, and the exchange rate is different from the beginning state already. We can tell this when compare with last time. Take a “Speed Talisman 15 days (cash item)” for example, it was sold at about 32m+/- in market for now. Last time (during 15th of April 2009) the price is 6m only. That means players who buy the speed talisman at 6m that time can earn 5 times the currency if they sell it now.



Another way of proving this is through the selling of virtual currency at legal website, Aingame.com. The exchange rate will differ according to the demand by players and the market price of the game. In MoSiang, Aingame.com assigns a character in vendor state yelling and "roaring", reminding players that they can buy MS gold from their website. In this way the authority can examine the exchange rate from player's trading pattern as well.

Screenshot 1 above shows that, as at 19th April, Aingame character “roars” the exchange rate at 105m per RM110/46 Singapore $. Screenshot 2 however, shows that as at 02 October 2009, the exchange rate is now at 200m per RM100 at Aingame.com website. 1m, being sold at RM1.05 at April, is now being sold at RM0.50. The value dropped sharply in half year’s time. Players are investing in the virtual currency in a risky way. If the inflation goes on like this, the game currency will slowly lose its value. Therefore, the government (RUNUP, Official Company) needs to do something to solve the problem.



Reference:

http://www.aingame.com

http://www.wired.com/gaming/gamingreviews/news/2004/01/61999

4.0 Creation of Goods and Services

Goods are created and destroyed in the game environment. Different group of players create different goods. Professionals in combining virtual weapons and armors can earn big portion of money, at a high risk and cost too. They provide combine service to other players, at a certain level of reputation, which rely heavily on their skills. Same to professionals in power up the goods and stone sellers, where they can create goods at a lower cost and have a more stable source of income relying their power up skill. Other players earn money through farming gold in leveling map. There are different patterns of income for different group of users. For instance, spear users and fire mage farm gold easily. They have skills which can kill a big area of mobs at the same time. Katana skills however eat a lot of mana, unable to multi kill mobs and therefore katana users are very hard to get rich as many cost are required to buy mp pot.

These group of players actually produce a stable Gross Domestic Product(GDP) each year. According to a research carried out in the United State, virtual internal markets, combined with illegal online trading on auction websites, Norrath has a gross national product per capita of $2,266, bigger than China and India. FYI, Norrath is the setting in online game call Everquest. I do not have a database to calculate the total GDP produced. There is only some records which briefly shows the pattern of earning money.
5.1 Power up Goods

In order to power up (PU) a virtual item with good stats, the character in game has to acquire a skill call “power up (PU)” skill.  The probability of PU-ing a highly valued item will increase following the increase of skill level. There can be higher probability when players purchase Power Up Protection Stones (Cash Item).

Materials needed to operate this business are to prepare the item to be PU-ed, and the raw materials (stones) to PU the item. Different item requires different classes of stones. The cost of the stones also varies. In previous post, I mentioned that strength bracers are created by using bracers and “inverse stones”. A beautifully PU-ed bracer can be sold at high price, if market do not have much substitutes. Eg. Level 45 Bracer can highest be PU-ed *58. Then it can be sold at market price 10m. Let us calculate the profit earned. Suppliers do not get so lucky every time. Even their “PU” skill level reach 30 (maximum), items can fail to PU too. Therefore, it is a concept of gambling.

We can calculate the cost of PU :
Bracer level 45 (can be acquired lower price from “Chang Ann 1 market” at 900k)
1 set/100 pcs “Inverse Stones” (can be acquired at 900k cheapest for 1 set)
Cost to PU Level 45 bracer=1.8m.

1>If failed, the supplier experience 900k losses. They have to buy a set of inverse stones again and retry their luck.
2>If successfully one-go get highest PU value like illustrated above, they can earn 8.2m (10m-1.8m). It depends on skill level, usage of cash item, and sometimes a lot of luck!

Here include a table of different materials needed for power up:

Note: All the materials used have to be in one set, which is 100 pieces, in order to get the highest possible result.


5.2 Stone makers


In the example given for PU items, bracer makers can buy the bracer from game NPC or get the clean bracer from mobs and quest. Where does the stone come from? They can be either dropped from the mobs or make by players themselves. If they make stones themselves, the cost will be lower. But firstly, they have to learn a skill call “separate” skill. Learning this skill enables players to acquire some rare ingredients from disassembling armors or weapons. Anything which is being combined can be disassembled using this skill, and players can 100% take back the ingredients, unlike “combine” and “power up” sometimes will fail.

Revenue, as discussed just now for a set of inverse stones, is 900k cheapest. However, on high demand period, the inverse stones can be sold at 1.5m per set. On the perspective of stone seller, we take the higher revenue, 1.5m.

The process of making stones is:


Step 4: Combine "Purple Rock" into "Inverse Stone". An "Inverse Stone" requires 10 units of "Purple Rocks".

Following the 4 steps above, we can calculate the cost for the making of "Inverse Stones".


1 piece of Inverse stone = 10 purple rocks

1 Purple rock = 2 jade rocks

2 jade rocks' minimum cost = 1 unit silk shoe/walking boots = 690 gold

Minimum cost of Inverse stone per set = 100 x 10 x 690 gold = 690k gold

This is the minimum cost. Normally the process of making stones will have failures. Assuming the player's combination skill reached maximum of 30, and probability of success rate is 0.90.

100 = 0.9x

x = 100/0.9 = 111.11

To get a set of inverse stones, cost required will be increased to:

112 x 10 x 690 gold = 772,800 gold



Profit earned by stone sellers for selling each set of Inverse stone is:

1,500,000-772,800 = 727,200

Stones seller will never lose money out of this business operation as the demand for stones is always there. However they earn money very slow and spends a lot of time on the process. Moreover, when the demand is low, they can earn only about 100k++ (900k-772k).

3.0 Market

Market is the place to trade the virtual items, where players meet to sell and buy. Economy is based on ms gold. Market price can be examined here. For new players, the first thing to do is to go explore the market place. Much information can be found.

3.1 Game

Players can buy and sell virtual items at the town area. In MoSiang, they grouped together at the centre of crowd, which is Chang Ann channel 1, KaiFeng channel 3, and LanZhow channel 1. These 3 places are popular as the players flow is high due to repot convenience and ease of navigation. Sellers can choose to enter into selling mode or buying mode. In buying or selling mode, they set the price and others can take it or leave it. Therefore, if the sellers want the stock to be sold out, they have to predict and estimate the price which buyers can accept. It cannot be too high or too low. When buyers set high price to collect materials, they can collect ingredients or item immediately as many players are willing to supply them. The situation is like this.

3.2 Discussion Forum

MoSiang is a quite complicated game. There is much knowledge to be studied especially on the creation of virtual goods and services. Even many experienced players played for almost 4 years (since launched in Malaysia), they also cannot logically explain a good method to combine the goods successfully. Therefore, many discussions about the game including methods to farm rare items, method to power up a good quality equipment, strategy to win guild war and even share screenshots about special moments in the game. The official forums of MoSiang in Malaysia is on9g.com, available in both mandarin and english version.

The topic about selling one of the top 5 Superiors, O000OFLAM30O0OO received a lot of feedback and replies. They probably discussed about the character's stats and skills or the price. Sellers normally have to include screenshots of their character disclosing their conpetitive advantages or offers the id in a package stating what powerful items are included along with trading the id. While buyers responding to the topic might counter offer the price given. Issues like the mode of payment, different nationality, trust, and theft isses are not to be forgotten too.

Buying id for new players can be discussed here too. For example, the BunnyZai in the forum do not want to waste time training a new character from level 1 to 70 again. Therefore, the easiest way to be strong in the game is to buy id from other players. Buying of pets, rare items can be posted here to find ways to get it. Sometimes discussion going on and there might suddenly be lucky occassions. Player who owns the item who are not interested in selling the item might suddenly needs to quit the game for certain reason. They can give the chance or priority to the needed ones.

2.0 Demand and Supply